BEYOND THE BONUSES: Tax dollars to outrageous UBS

AMERICANS are justifiably furious about the $165 mil lion in bonuses paid at AIG. But what if, instead of subsidizing only incompetence, AIG had also sent billions of your tax dollars to people who'd laundered money for terrorist states, helped Americans cheat on their taxes and banked for the Nazis?

Well, it did. Earlier this week, AIG revealed that it had paid $5 billion of its bailout money to the Swiss bank UBS.

It's richly ironic that US taxpayer dollars are making UBS whole. At every opportunity, UBS has shown contempt for the American government banking for America's enemies, and then hiding behind Swiss secrecy laws whenever government investigators have tried to probe.

Take, for example, UBS's assistance to state sponsors of terrorism. In 2003, American troops in Iraq found $762 million in US bank notes stashed in hideouts belonging to Saddam Hussein. The serial numbers were traced to UBS, which had distributed the money as part of a New York Fed program to take old US dollars out of circulation and replace them with new ones.

One condition of the program was that participating banks could not exchange currency for countries against which the United States maintained sanctions. But UBS thought it didn't have to obey the rules. An investigation revealed that it had also exchanged billions of dollars for Iran, Cuba and Libya sanctioned countries and state sponsors of terrorism.

UBS paid a $100 million fine in 2004, but members of Congress weren't satisfied. They launched inquiries, and were met with years of resistance justified in the name of Swiss bank secrecy. The bank still hasn't opened up completely Rep. Dana Rohrabacher (R-Calif.), who chaired a hearing into the matter, says: "The fact that US taxpayer money went to a bank like UBS, which continues to hide behind Swiss law, is outrageous."

The currency debacle wasn't the first time UBS thumbed its nose at congressional investigators. In the 1990s, it was equally intractable when Sen. Alfonse D'Amato and others sought restitution for victims of the Holocaust.

Volumes have been written about the collusion between UBS and Hitler's regime whether it was using slave labor from Auschwitz, laundering money for the Nazis or pocketing the assets of Jews who had died or disappeared during the war. When Congress investigated decades later, UBS stonewalled again refusing to provide evidence, and even destroying it.

In 1998, UBS and Credit Suisse finally agreed to pay a $1.25 billion settlement but an expert who led the congressional investigation as a member of D'Amato's staff, Gregg Rickman, says it was just a tiny fraction of what the banks really owed.

Rickman is stunned that UBS is now getting taxpayer money through the bailouts and a Holocaust survivor who now lives in Queens seems to agree.

Leo Rechter spent his childhood hiding in basements in Belgium; his father was deported and killed in Auschwitz. Rechter says the family's valuables were looted by the Nazis, and he still seeks restitution from the Swiss banks he believes were complicit.

In October, he and other survivors sent a letter to the Treasury Department warning that if taxpayer funds subsidized foreign institutions that had profited from the Holocaust, it would be a "disgrace." A lawyer for the survivors says the letter has yet to receive any response.

Rechter calls the fact that UBS is now getting his tax dollars "another injustice."

Today, UBS is still up to its old tricks. The bank remains enmeshed in a Justice Department investigation after helping American citizens hide billions of dollars from the IRS. Last month, it paid a $780 million fine and, after mounting outrage, agreed to disclose the names of 250 clients. That's a nice start but the federal government still seeks about 50,000 more.

A UBS spokesman, Mark Arena, says the bank has atoned for any wrongdoing and that the bailout payments it received "were made in conformity with our counterparty agreement with AIG."

UBS may feel it's an innocent bystander in the AIG mess but, around the world, other losers in the financial game aren't getting bailed out. UBS is lucky that American generosity keeps it from having to write off a $5 billion loss.

It would be nice if Congress and the Obama administration could muster a little outrage over that. If they're willing to go all-out to get back $165 million in bonuses, the least they can do is try to keep UBS from getting billions.

They could also play a little smart strategy. If Swiss banks are going to be salvaged by our tax money, they should at least cooperate with our government investigators. In July, the Justice Department will hold another hearing into the tax fraud matter. If by then UBS has pocketed billions of our tax dollars and still won't identify the rest of the cheats, that will be a real outrage one to put the AIG bonuses to shame.